Unraveling Elliott Wave Alternation: Key Insights for Advanced Analysts
Elliott Wave has rules and guidelines. Rules should always be met all the time, so be careful that any Elliott Wave work you are considering meets all Elliott Wave rules. Elliott Wave work that ignores and breaks Elliott Wave rules is worse than useless, because it will waste your time and give you inaccurate predictions.
Elliott Wave guidelines are not rules, so they do not need to be met all the time. An Elliott Wave count should meet all rules, and then meet as many guidelines as possible. The more Elliott Wave guidelines met, the higher the probability of the Elliott Wave count.
One of the major guidelines is the guideline of alternation. This guideline should be applied with some flexibility. Most commonly this guideline is applied to waves 2 and 4 within an impulse. The guideline states they usually exhibit alternation in one or both of structure and depth. For example, wave 2 will most commonly subdivide as a zigzag and will most commonly be deep, ending close to the 0.618 Fibonacci ratio of wave 1. Whereas wave 4 may exhibit alternation by subdividing as a sideways Elliott Wave corrective structure such as a flat, combination or triangle, and it will most commonly be shallow, ending close to the 0.382 Fibonacci ratio of wave 3.
Taking the concept of alternation deeper, structure and depth are not the only ways to apply this between waves 2 and 4. Zigzags are by a very wide margin the most common Elliott Wave corrective structures and fairly often both waves 2 and 4 may subdivide as zigzags. They may still exhibit alternation in depth, with wave 2 commonly deep and wave 4 commonly shallow. They may also exhibit alternation between each zigzag; one correction may have an extended A wave and short C wave within its zigzag, and the other may have a short A wave and extended C wave within its zigzag.
Alternation may also be exhibited between actionary waves within an Elliott impulse. Third waves are very commonly extended. First and fifth waves are less commonly extended (depending upon the market). When a first wave is not extended and a third wave is extended, this is another example of alternation.
Alternation may be exhibited within zigzags. When wave A subdivides as an impulse and wave C subdivides as an ending diagonal, this is an example of alternation.
Knowing how to apply the guideline of alternation with flexibility can assist an analyst in making more accurate Elliott Wave predictions. For example, as wave 4 arrives just because wave 2 subdivided as a zigzag do not dismiss the possibility that wave 4 may also be a zigzag. Consider how the zigzag of wave 2 subdivided and consider wave 4 may exhibit alternation while also subdividing as a zigzag. Another example, if wave 1 is short, then expect alternation with wave 3 very likely to be extended.
Finally, looking for alternation can assist in judging the probability of an Elliott Wave count. A wave count which has better alternation would have a higher probability than an Elliott Wave count which has poor alternation.